### Understanding Market Equilibrium and Government Interventions in the Corn Market#### Demand and Supply EquationsThe demand (D) and supply (S) for corn are characterized by the following equations:- **Demand:** $ D = 1000 - P $- **Supply:** $ S = 3P $Where $ P $ is the price.#### Problem 14: Price Controls and Market OutcomesThe government introduces:- **Price Floor:** $260- **Price Ceiling:** $380**Objective: Determine Equilibrium Production, Consumption, and Changes in Surplus****Step-by-Step Solution:**1. **Find Equilibrium Without Government Intervention:** \[ 1000 - P = 3P \] \[ 1000 = 4P \] \[ P = 250 \] \[ D = 1000 - 250 = 750 \] The equilibrium price is $250, and the equilibrium quantity is 750 units.2. **Effect of Price Floor ($260):** - At $ P = 260 $: \[ D = 1000 - 260 = 740 \] \[ S = 3 \times 260 = 780 \] The quantity demanded will be 740 units and the quantity supplied will be 780 units. There is a surplus of 40 units.3. **Effect of Price Ceiling ($380):** - At $ P = 380 $: \[ D = 1000 - 380 = 620 \] \[ S = 3 \times 380 = 1140 \] The quantity demanded will be 620 units and the quantity supplied will be 1140 units. There is a surplus of 520 units.**Consumer and Producer Surplus Changes:**- Changes in consumer and producer surplus depend on areas under the demand and supply curves adjusted for price floors and ceilings. Detailed graphical analysis is required to compute exact changes which are typically demonstrated through integration or geometric calculations.---#### Problem 15: Achieving Desired Consumption with Tax/Subsidy**Objective: Ensure Consumption is 700 Units****Options:**1. **Per-Unit Tax on Producers:**2. **Per-Unit Subsidy for Producers:**

Given Demand equation: D = 1000-P Supply equation: S = 3P Price floor at $260 Price ceiling at $380

The demand and supply for corn is given by D=1000-P and S=3P repsectively. 14) To stabilize corn prices, the government introduced a price floor of $260 and a price ceiling of $380. What will the equilibrium production and consumption levels be? By how much will the consumer surplus change? By how much will the producer surplus change?

The demand and supply for corn is given by D=1000-P and S=3P repsectively. 14) To stabilize corn prices, the government introduced a price floor of $260 and a price ceiling of $380. What will the equilibrium production and consumption levels be? By how much will the consumer surplus change? By how much will the producer surplus change?

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter7: Consumers, Producers, And The Efficiency Of Markets

Section: Chapter Questions

Problem 6PA

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Consider a competitive market for corn for which the quantities demanded and supplied (per year) at various prices are given as follows: Price (RM) Demand (millions) Supply (millions) 60 22 14 80 20 16 100 18 18 120 16 20 1. What are the equilibrium price and quantity of corn? 2. Suppose the government sets a price ceiling of RM80, will there be a shortage or surplus and how much? Explain why the market is in disequilibrium. 3. What are the impacts from the regulated price by government?
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